The MoviePass Saga Takes A Dark Turn

In early July, I received an email from the company about the “evolution” of its product, centered on a change it is calling “Peak Pricing.” If you want to see a movie at a particular time and place where demand is high, MoviePass may now ask you to pay an additional surcharge to secure your seat. The specific charge will vary depending on the movie and the showtime, but the example the email included displayed a $3.43 surcharge for an in-demand showing of “Avengers: Infinity War.”

On its website, MoviePass assures subscribers, “Even with the peak pricing fee, you will be paying less for the ticket than you would if you bought it at retail price.” In many parts of the country, this will likely be true; unless the fee is more than $8 or $9, a New York City resident will still do better with MoviePass than buying tickets at full price, even if she only sees a movie every month or two. But considering the varying costs to see movies across the country and the fact that MoviePass is being cagey about surcharge levels, it is not hard to understand why subscribers are wary of this promise. (The company told CNET and several other news outlets that surcharges will typically range from $2 to $6 depending on the film, but this information was not reflected on MoviePass’s website as of this writing.)

While it wasn’t clear from the original email, I did discover that prepaid subscribers like me are immune from peak prices as long as our current memberships are valid. Once we are up for renewal, however, we will also have to pay a surcharge or choose a less-popular time slot instead.

This move certainly will not enhance the company’s reputation among movie buffs and other customers who have already been whipsawed by the service’s frequent changes in terms. Potential customers, too, have now had plenty of chances to see how quickly MoviePass is willing to change its rules. Even if it still looks like a good deal today, there is decreasing certainty it will be a good deal tomorrow, assuming the company’s business model survives at all.

The rollout of peak pricing also illustrates the need for MoviePass to do better when communicating with its customers. It was not clear from the email I received whether I would be subject to peak pricing under my current plan, which arguably could have been a breach of contract. The email indicated the company would be introducing a “Peak Pass” at some time in the future, but did not make clear whether this was a feature subscribers would need to purchase; the website clarified that every subscriber will eventually be able to waive one peak fee per month. Out of curiosity, I visited the MoviePass website the same day I received the email, and it still advertised a $9.95-per-month “unlimited” offer, with no hint on its homepage that the unlimited films are limited to one viewing per film and that some showings might require extra payments.

The addition of peak pricing arrives in the face of more bad news for a service that has struggled for some time. MoviePass enjoys a rapidly growing pool of customers – its CEO, Mitch Lowe, projected it would reach over 5 million subscribers by the end of 2018 – but it has been bleeding cash since it reduced its prices in order to grow that subscriber base. Helios and Matheson Analytics, the service’s parent company, reported that MoviePass lost $40 million in May due to subscriber growth.

MoviePass already faces resistance from movie exhibitors, whose reactions have ranged from suspicion to outright hostility. AMC Entertainment, one of the loudest critics, fired another shot in its war on MoviePass by introducing “AMC Stubs A-List.” The service is more expensive, at $20 per month, and allows for slightly fewer films, up to three per week. However, it offers benefits MoviePass doesn’t: Viewers can reserve seats online, 3D movies are included, and there is currently no restriction on repeat viewings or seeing multiple movies in a day. And, of course, there are no peak surcharges.

I would not be surprised if other chains followed suit. Alamo Drafthouse has said it is experimenting with an “Alamo Season Pass.” Cinemark already offers a bare-bones version in the form of its “Movie Club,” which allows members to see one movie of their choice per month for $9, rolling over unused tickets.

Studios, meanwhile, are largely sitting on their hands, even though they stand to benefit if MoviePass succeeds at increasing theater attendance. And privacy regulators are no doubt casting a wary eye on how MoviePass might try to monetize the information it gathers about the viewing habits of its 3 million subscribers, which is the company’s stated path to profitability. The only people rooting for MoviePass to succeed seem to be its financiers and its subscribers, and both are feeling abused right now.

A variety of observers have compared the new peak pricing model to surge pricing for ride share businesses. But customers are not already paying Uber or Lyft a monthly subscription fee for service that was advertised as “unlimited.” MoviePass says the peak surcharge is an attempt to avoid raising the per-month fee, but I wonder how complicated the service can get before subscribers are too annoyed to try to navigate all the exceptions to what was once a simple idea.

MoviePass could still turn things around. I’m reminded of Netflix’s misguided attempt to break apart its streaming and DVD-by-mail services in 2011, when the latter was still more popular than it is today. Customers would have been required to maintain separate accounts, with separate passwords and billing information; the change prompted significant pushback. In the end, Netflix did split the services, but reacted to customer feedback by changing course and allowing customers to continue to use the same account both places, abandoning the ill-advised “Qwikster” branding. Today only about 3 million subscribers get DVDs, compared to 125 million subscribers who use the streaming service. But Netflix built a lot of goodwill seven years ago by listening to feedback about what made their service appealing to the people who actually used it.

So maybe this is the dark part of MoviePass’s story, right before the plot turns and the good guys win. Right now, however, the script reads more like a “60 Minutes” segment about an evil corporation abusing the public. I hope MoviePass figures out a way to flip the script and still stay in business.

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